Is converting IRA to
Roth IRA right for you?
Pro: your future income is tax-FREE. Con: you pay taxes now on the amount you convert. Even with lower current income tax rates, you still pay taxes at your income tax bracket, not at capital gains rates. Converting is a good move if you are early in your career and don’t have a large IRA. Converting is a bad move if you have a sizeable IRA and your tax rate will be lower in retirement. You may not need to convert if your employer now offers a Roth 401k. So instead of getting the break on taxes now you may have a HUGE break on all the compounded earnings over the next 20-30 years. Since you do not pay tax on the earnings later nor the contributions anytime, you could retire early. If you don’t need this money for income, Roth accounts go tax-free to heirs. A regular IRA inheritance is taxable at the heirs’ income tax rate. Even if you can’t contribute directly because your income is too high, you can make non-deductible IRA contributions and then convert to a Roth so that your future gains are tax-FREE. Another attractive option is to buy no-dividend stocks and then sell off when needed in retirement. The capital gains tax is less than income taxes and when left to heirs, there is no tax. Heirs receive your gift tax-free due to the “stepped up basis” rule.
Pro: your future income is tax-FREE. Con: you pay taxes now on the amount you convert. Even with lower current income tax rates, you still pay taxes at your income tax bracket, not at capital gains rates. Converting is a good move if you are early in your career and don’t have a large IRA. Converting is a bad move if you have a sizeable IRA and your tax rate will be lower in retirement. You may not need to convert if your employer now offers a Roth 401k. So instead of getting the break on taxes now you may have a HUGE break on all the compounded earnings over the next 20-30 years. Since you do not pay tax on the earnings later nor the contributions anytime, you could retire early. If you don’t need this money for income, Roth accounts go tax-free to heirs. A regular IRA inheritance is taxable at the heirs’ income tax rate. Even if you can’t contribute directly because your income is too high, you can make non-deductible IRA contributions and then convert to a Roth so that your future gains are tax-FREE. Another attractive option is to buy no-dividend stocks and then sell off when needed in retirement. The capital gains tax is less than income taxes and when left to heirs, there is no tax. Heirs receive your gift tax-free due to the “stepped up basis” rule.
Roth IRAs make a great
gift for your grandchild too. Roth funding even from their early teen job
income means they will have a tax-FREE retirement.
Is an HRA right for you?
New rules provide a hint of Trump’s new and “something terrific” health
insurance plan announced June 18. The
new plan won’t actually be available until 2021 but the promise may be
enough to sway some voters. The new health reimbursement arrangements
(HRAs) rules make individual markets purchase of a policy more attractive
to businesses. Thus a small business does not need to provide health
insurance—it can just give pre-tax dollars to employees so they can shoulder
the responsibility of finding/paying for a policy. Any unused portion of the
HRA in one year may be carried forward to subsequent years. If certain rules
are followed, neither employer contributions nor employee reimbursements from
an HRA are subject to income or employment taxes under federal law. The old
rules excluded premium payments with HRA money. Employers will have an incentive
to dump ‘at-risk’ employees to fend for themselves in the individual market.
Thus young and healthy employees are encouraged by their employers to use the
HRA plan and buy stripped down health plans. Older and sicker employees would
be given untaxed money to help them purchase whatever plan they could afford.
Thus the new TrumpCare plan of 2021 can claim to be ‘something terrific’ for
most employees in that they can buy whatever coverage they prefer. They have
the ‘freedom’ to make the ‘choice’ to buy incomplete insurance. If an accident
required more care than their plan was scheduled to pay, they would be forced
to declare bankruptcy because they made the ‘choice’ for that plan. Thus
everyone COULD have ‘something terrific’ for health coverage or choose to go
bankrupt.
Will voters pick a candidate based on their need for adequate health
insurance?
SEC ruling now puts the burden
on us to ask about advisor ‘conflicts’
The new industry-friendly statement shifts the burden to us regarding
broker/advisor ‘conflicts of interest.’ In its final
version of Form CRS, the disclosure document that will be given to retail
investors, RIAs (advisors) will be required to say, “When we act as your
investment adviser, we have to act in your best interest and not put our interest
ahead of yours. At the same time, the way we make money creates some conflicts
with your interests. You should understand and ask us about these conflicts because they can affect the
investment advice we provide you.” WOW. Instead of our broker/advisor having to
disclose their conflicts, we must ‘understand and ask them’ about ‘these
conflicts.’ WRONG! We can’t ask how they conflict with our interests if they
are not disclosed. How can we know about the sales contest for a
Hawaii vacation if we buy their product? How do we know about the firm’s soft
dollar rewards for buying the expensive mutual funds? And how could
investors know they are getting a deal that reflects ‘MY best interest’? Mutual
funds can cost 0.05%
or 9.86%
per year and annuities can cost 0.1% or 10%
and sales fees can be 5% upfront or 0.75% for 30 years
(22.5%). Which would you sell if you were a broker/advisor making a living from
other people’s money?
Need a graduation gift?
The greatest gift you can give is financial knowledge. No matter how much
your young graduate makes, it is up to YOU to show them the Buffett
investment strategy. Make sure they can make and manage money.
At my first job, I had no clue which investment to use for my 401k contributions
and company match. The HR person told me to put it into the 'safe' stable value
fund. That was the worst choice at my age I learned later
when I got my securities’ licenses. If I had followed their advice I would have
ended up with about $150,000 instead of a Wealth Reserve of
$877,233 about 33 years later.
$$$$$$$$$$$$$$$$$$$
How Govt wastes our money: Congress spends $1.3 Trillion we don’t have!
Multiple election
security bills are dead: killed by Senator McConnell: Putin’s hackers!
Trump claims his
2020 loss: “Market
Crash the likes of which has not been seen before!”
Govt report: we don’t know how to handle money: mandate
college financial course?
Kids are to be interned in World War II-era Japanese
American concentration
camps.
Millions to be deported but home country
must give ‘travel paperwork’: internment.
Trump EPA to go ahead with catastrophic
warming of the planet. Increase, not reduce C
SCAMS/SPINS:
Art
of the ‘bad’ Deal: Buying bad land for another golf place turns into HUGE
tax deduct
Computer Win 10 fake
pop up ads & ransomware allowed by MS
‘Facility fee’ new
bogus charges for any medical procedure, even if no ‘facility.’
Trump
cuts 70,000 from health care: will we vote our health care needs 2020?
Trump’s convicted felon,
Manafort,
moved from Rikers to comfortable
Stephen
Bratton TX Baptist clergy caught
sex abuse on teen multiple times: bond
Brokers screaming
‘fire fire’ as NJ regulator plans to require
putting client interest first.
Ways
to cheat on taxes for the wealthy: IRS doesn’t have auditors to catch them.
Head
‘phone hooks’ growing on younger people who use phone hands-free often?
CA: arsenic
in our ‘pure’ ‘spring’ water—drink filtered tap. Cancer
water costs more!
Annuity earning 8%: Marketing
hype to sell sales leads—“Truth is not truth”
Kansas City Life caught
overcharging customers: taking cash value they earned
Jobs:
Are you still
getting low
wages with the employment rate low? Won’t get better than this
Average employer
401(k) match reached 4.7% this year: new
high will last?
Highest salary
cities/regions shift
from auto makers to digital makers: things to processes.
Employers use unique
ways to pay
student loans for employees: get smart
Wages are going down
for most: lower
than in 1968 with inflation we can buy much less.
Trump
threatened TIME reporter with jail: Not fake news—on tape.
Who owns your account now?
Where did your
broker or advisor go—the industry
changes quickly now.
Facebook
currency is NOT for you unless you have to pay
off criminals.
Miracle:
Baby
left in forest is alive: Outlawing choice for women in GA does not stop
intercourse.
IAN
41 Watchung Plaza,
B242
973.746.2014
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